Only about 5% Facebook gamers pay to play freemium games. If Facebook could up this percentage, it and its third-party app developers could make a lot more money. That’s the idea behind a new promotion Facebook announced today where those who’ve never bought Facebook Credits virtual currency before will be offered $4 in free Credits when they buy $1. This gets users to set up their credit card and experience the rush of paying for an enhanced gaming experience.

Years ago when Facebook first launched its Credits virtual currency, it offered free Credits to some users. While this might have got them hooked on spending virtual currency, it didn’t addict them to paying for it.

Facebook needs credit card numbers badly. Apple has amassed an enormous collection after 10 years of iTunes Mp3 sales, which are now helping it easily sell apps and in-app purchases. If Facebook wants to grow its revenue to satisfy outside investors and be a competitive mobile gaming platform, it needs to get users ready to pay.

But like the street corner pusher says, “this ain’t no charity”. Facebook is only surfacing the promotion in sidebar ads, and TrialPay in-game promotions and offer walls to those who haven’t already bought Credits. User than have to set up a credit card or connect a PayPal account and pay $1 to get the extra $4, or 40 Credits. And next time, they’ll have to pay full price. Facebook wisely does not provide any way to reach the promotion directly in order to deter users from trying to cheat their way to free currency.

With any luck, Facebook will be able to up the percentage of users who monetize, and thereby discover new whales — gamers who spend orders of magnitude more than the average payer and drive the bottom lines of both indie developers and giants like Zynga.

after some antipathy towards Facebook, perhaps I should be a few shares when It first starts trading. Not my usual cup of tea, but you never know. Maybe in five years it will be much higher. Or maybe 10 years.

For the most part I have been able to separate my likes and dislikes from my investment decisions. Whether you like Facebook or not, it is probably destined to be the most important tech IPO since Google.

>> probably destined to be the most important tech IPO since Google <<

Just looking at 2005, BOT and BIDU will be tough for FB to beat in importance or in value for public investors. BOT popped to more than $130 within 3 days of its October 2005 IPO and was eventually bought by CME. I consider that a technology company.

And BIDU IPO'ed at $29 per ADS ($2.90 adjusted). Without Baidu Google may have dominated search in China.

There are probably some contenders for 2006-2011. VMWare is one. And First Solar for signaling a blowoff that didn't end until it ran to > $300.

Facebook's IPO is a liquidity event forced upon the company by it exceeding 500 shareholders.

The influential proxy adviser took aim at Facebook’s dual-class stock structure in a research note published on Monday, deriding it as an unfair system to regular shareholders — one that could be extremely painful to unwind down the road.

By creating multiple classes of stock — in Facebook’s case, A and B shares, with the latter carrying 10 times more voting power — the social-networking titan is following the path set by LinkedIn, Groupon and Zynga. As the Deal Professor and others have noted, however, a number of unusual arrangements give the company’s chief executive and co-founder, Mark Zuckerberg, control of about 57.1 percent of the company’s voting power.

It’s little surprise that I.S.S., long a critic of dual-class shares, is against Facebook’s proposed system. Let’s count the ways the shareholder adviser denigrates the framework in Monday’s note:

“This is a governance profile with a defense against everything against hubris.”

I.S.S. later refers to “governance structures which diminish shareholder rights and board accountability.”

I.S.S. also calls it “an autocratic model of governance.”

In what seems like the equivalent to I.S.S. of adding insult to injury, Facebook also plans to adopt a staggered board, one where only some board members are up for election every years, and a provision that prevents shareholders from complaining about their lesser voting rights.

But the proxy adviser also notes that, should Facebook want to dismantle its dual-class system, such a move could be difficult. I.S.S. details the issues that Benihana, Telephone & Data Systems and Magna International suffered in even partially streamlining their shares. Among the consequences was internecine warfare between different shareholder classes, which led to at least short-term pain for investors.

Ultimately, however, Facebook shareholders face what I.S.S. calls a “Hobson’s choice” at the moment. They can become second-class shareholders with relatively few protections or miss out on one of the most eagerly awaited I.P.O.’s of the decade.

GlennDo you have a timeline of funding for facebook? I heard they got $500,000 for 10% early on to give an initial valuation of $5M but I don't know much beyond that. It would be nice to have that in the title page, if we could find it.